What Was the Impact of the Parking Authority Rate Hikes?

Summary: A look at audited figures on the 2014 to 2017 Pittsburgh Parking Authority (PPA) facility rate increases and the taxes paid by the PPA and other parking facility owners to the City of Pittsburgh.

 

In June of 2014 the PPA board approved a series of annual rate hikes at its parking facilities (garages and attended lots). Downtown garages contain over 6,700 lined parking spaces. These were the first increases since 2004 and came from a recommendation in the City of Pittsburgh’s 2014 recovery plan. Since the city’s parking tax rate was (and is) locked in at 37.5 percent in Act 44 of 2009 the plan suggested requesting that the PPA increase parking rates to provide more revenue to the city.

The increases affected daily, evening/weekend, and lease parking rates. In August 2014 the increases were essentially across the board for daily (one hour or less, two hours or less, etc.), evening/weekend and lease rates. The increases for daily rate of one hour or less of parking were in the range of 11 to 33 percent. The increases in 2015 applied mostly to the daily rate for four to 24 hours and were in the range of six to nine percent as well as on lease rates. Thus the price increases were heavily front-loaded in 2014. A final increase that was to occur in 2017 on the daily four to 24 hours and on lease rates was rescinded. The increase in the evening/weekend rate was implemented.

For example, a patron parking in the Wood Allies Garage for eight hours saw the rate change from $9.75 to $12.00 in August 2014, to $13.00 in August 2015 and finally would have paid $14.00 in August 2017 but that increase did not occur. At the Mellon Square Garage a patron parking for eight hours saw the rate increase from $13.75 to $18.00, to $19.00 in the time frame.

In 2013—the year before the increases—PPA parking facility receipts totaled $29.2 million. Audited amounts for each year since then show receipts increased a total of $6.8 million (23 percent) by the end of 2017.

PPA Parking Facility Receipts, 2013-17

So how did the city benefit from the rate increases? Based on the tax revenue paid from parking receipts (27.27 percent—(0.375/1.375) the city’s collection of parking tax revenue from facility receipts rose from $7.9 million to $9.8 million ($1.8 million, or 23 percent) from 2013 to 2017. From 2013 to 2014 the tax from facility receipts rose 7.7 percent. After the additional price increase in 2015, the tax on facility receipts climbed 10.5 percent in 2015 over 2014. By 2017 gross PPA receipts had risen 23 percent. Bear in mind that total parking prices at PPA facilities had been raised by an average of around 25 percent. Thus, it appears the volume of taxable parking was essentially unchanged over the period.

Recall that the city also collects parking taxes from the PPA’s facilities but also from other public, private, and non-profit owners of lots and facilities. The city’s parking tax collections rose from $51.9 million to $58.6 million ($6.7 million, or 13 percent) from 2013 to 2017. This reflects over $200 million spent on parking in 2017. Since the taxes from PPA facilities accounted for $1.8 million of that change, $4.8 million came from non-PPA facilities. This 11 percent rise was lower than the increase in taxes from PPA facilities and resulted from a boost in parking prices or an increase in parking volume or some combination of both.

The parking tax is a key part of the funding of the city’s pensions. Under the 2010 plan that avoided a state takeover of pensions the city dedicated a stream of parking tax revenue. This year marks the first of 23 annual payments of $26.8 million in parking tax dollars, a doubling of what was being contributed from the tax the last several years to the pensions.

There were additional changes in the relationship between the PPA and the city during the years of the facility rate hikes. In 2015 parking meter rates changed and the PPA board amended its cooperation agreements with the city regarding revenue sharing from meters and the parking court as well as the payments in lieu of taxes made to the city. Overall, in the years 2013 to 2017 the total amount paid by the PPA to the city rose from $18.8 million to $29.8 million and the percentage of PPA expenses accounted for by payments to the city grew from 41 percent to 51 percent.

The city’s high parking tax is a significant part of the budget. It was 13 percent of total tax revenue and was the third largest tax in terms of dollars collected in 2017.

Pittsburgh MSA Out of Sync with U.S. Labor Market Performance

Summary: The April jobs numbers were released for the Pittsburgh Metropolitan Statistical Area (MSA) and the results are not too encouraging.  While growth was positive, it does not keep pace with the nation overall and underscores just how much work needs to be done to boost the area’s economy.

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Recently released labor force and employment data for the seven-county Pittsburgh metro area show the region trailing the nation for the April 2017 to April 2018 period.  In April 2018, the Labor Department survey of households show the region’s labor force tumbled by 17,600 (1.5 percent) and household employment (persons employed) slipped by 8,500 (0.7 percent) from the April 2017 level. Meanwhile, over the same 12-month period, the U.S. labor force climbed by 1,346,000 (0.8 percent) and the number of people counted as being employed rose 2,020,000 (1.3 percent).

Data from the Establishment survey, which counts the number of payroll jobs as opposed to the number of persons working, indicate private payroll employment in the Pittsburgh region rose 14,300 (1.35 percent), driven largely by gains in education and health, leisure and hospitality along with professional services. There were modest pickups in the goods sectors as well.

However, nationally, private payrolls jumped by 2,271,000 (1.8 percent) during the period, a 33 percent faster gain than the Pittsburgh region.  Note, too, that the national growth rate reflects both fast growing and slower growing states.  For instance, North Carolina comes in at 2.1 percent, Texas at 3.2 percent and Florida at 2.2 percent. These and other rapid-growth states are propelling the country to faster growth than the Pittsburgh MSA as well many other states.

The region’s 1,069,700 million payroll jobs represent the highest April level for the last ten years (2018-2008).  Still, the ten-year growth was only 4.7 percent or well under one half percent per year. The highest recorded amount in any month over the last decade occurred in November 2017 when the survey showed 1,078,200 people were on total private payrolls.

The April to April increase represents the smallest gain thus far in 2018.  In January, the 12-month increase was 17,500, for a rise of 1.7 percent, while the February gain was 15,700 and March posted a 12-month pickup of 15,300.

In the Pittsburgh MSA, leisure and hospitality added 3,500 new jobs from April 2017, a gain of just under three percent.  That was the smallest 12-month gain so far this year. The national April to April gain was 1.6 percent and has been gradually declining since January’s high rate of 2.09 percent.

Education and health provided the Pittsburgh region with the largest number of jobs, adding 5,400 jobs in April 2018 compared to the year ago reading—a 2.2 percent rise. Of this total, the health care and social services sector contributed 5,000 of the new jobs, while educational services added only 400.

Nationally, the education and health services sector did not grow quite as fast as the Pittsburgh area, increasing by only 1.87 percent.  The national growth lagged Pittsburgh’s in hospital, nursing facilities and social assistance.

The trade, transportation and utilities group was the weakest sector in the Pittsburgh MSA, losing 1,400 jobs over the year (-0.66 percent).  The monthly year-over-year losses stretch back to December 2017.  The decline was led by a fall in retail trade employment of 2,200—a drop of 1.8 percent.  That being said, not enough information is available to figure out exactly where the losses happened.  There was an increase in building materials and general merchandise stores but losses in food and beverage stores as well as in clothing and department stores.

Meanwhile, in stark contrast, the trade, transportation and utilities sector nationally had an April year-over-year pick-up of 1.11 percent.  It has been picking up steam as 2018 progressed ranging from a low of 0.58 percent in January to a high of 1.17 percent in March.  At the national level, retail trade is also picking up momentum.  After a decline in January, the year-over-year growth rates have been increasing every month since.

The April 2018 jobs and labor force numbers show that Pittsburgh lags the national labor market pace of improvement. As we have been writing for years, reducing taxes, repealing onerous regulations and curtailing the power of unions would go a long way boosting the business climate which in turn will lead to better labor market numbers. Curbing the desire and willingness to subsidize development and highly questionable ventures that should fund themselves would be a giant step toward relying on the free market to drive the economy.

Recent Population Changes in the Pittsburgh Metropolitan Area

Summary: A look at the new U.S. Census Bureau population estimates. From July 2016 to July 2017 population fell in the Pittsburgh metropolitan statistical area (MSA), Allegheny County, and the City of Pittsburgh.

 

Based on the Census population estimates as of July 1, 2017, the seven-county Pittsburgh MSA had 2,333,367 people (making it the 26th largest MSA in the U.S.). Over half of the MSA’s population, 1,223,048, is based in Allegheny County and one-quarter of the county’s population, 302,407, resides in the City of Pittsburgh.

Population estimates from July 2016 and July 2017 in the Pittsburgh MSA show a drop of 8,169 people, or 0.3 percent. The MSA was one of 11 in the nation with July 2017 population counts between 2 million and 2.5 million. Of that group nine MSAs gained population, including Cincinnati, Indianapolis and Kansas City. Besides Pittsburgh the only MSA in the group that lost population was Cleveland where there was a slight drop of 0.1 percent to just over 2 million people.

Meanwhile, population declined in six of seven counties in the Pittsburgh MSA, with Fayette and Armstrong posting losses of 0.7 percent, the largest percentage drops in the MSA. Allegheny County’s population count declined by 4,505, or 0.4 percent from 1,227,553 in July 2016. Butler County was the only county of the seven with a gain in population, rising from 186,207 to 187,108, or 0.5 percent.

The largest municipality in Allegheny County, Pittsburgh, lost 2,610 residents over the year ending in July 2017. But it is worth noting that the 2016 estimate for the city was revised upward in the latest data. Due to this upward revision to 305,017, the fall to the 2017 estimate of 302,407 made the year-over-year loss appreciably greater than it otherwise would have been.

As of this writing population estimates for the Pittsburgh MSA and Allegheny County have not been revised as was the case for Pittsburgh. But the trend from the 2010 Census through seven years of population estimates for the county and city seems clear—there were year-over-year increases until 2013 followed by year-over-year decreases for the county since then, and for the city with the exception of 2016. In terms of numbers of people, the latest population declines in Allegheny County and the city were larger than any of the other counties in the MSA.

With two years to go until the next official Census, what are the longer term demographic trends that might have an effect on the size and makeup of the local population? Two previous Institute studies are informative.

A decade ago an Institute report (2007-03) examined the components of Allegheny County’s population changes—natural increase (births minus deaths) along with net migration (net domestic migration plus net international migration)—from the 2000 Census forward. Deaths outpaced births in the county from 2000 to 2007 by 11,585. International migration was a positive 14,334 while domestic migration was a negative 59,753, resulting in a negative net migration of 45,419. Along with statistical anomalies for demographic events that cannot be accounted for—what the Census Bureau refers to as a residual—there was an actual total drop of 62,456 in the county’s population.

Replicating that study by comparing 2017 estimates to 2010 Census figures shows deaths continued to exceed births—but in this time period by only 3,264 and quite smaller than the 2000 to 2007 figure. The international migration over the period was 24,646, which was 10,000 greater than it was between 2000 and 2007. With domestic migration a negative 20,888, the resulting net migration was a positive 3,758. Factoring in the residual resulted in an overall decrease of 290 in Allegheny County’s population over the seven year period.

In a 2016 Policy Brief (Vol. 16, No. 24) we examined the population changes by age distribution of the City of Pittsburgh’s population. From the 2010 Census to the 2016 estimate the city gained in the age groups 20-34, 55-64 and 85 and over. The 20-34 age group accounted for over 30 percent of the total city population in both years, well above national averages for this age range. This is due in large part to the numbers of college and university students in the city.

The number of people in the 35-54 age group and the 0-19 age group fell from 2010 to 2016 and their share of total city population likewise fell. That strongly indicated that people in prime working years, likely with school age children, were leaving the city. Since that Brief there was a state Supreme Court decision upholding an arbitration award on police residency may have already had impact on these age groups.

In a bit of better news regarding population, the recent population losses in the county and the city are a small fraction of the declines from the 1990 through 2010 Census years. Nonetheless, the pace of natural increase and changing age distribution will hold important implications for the social and economic structure of the county and city in the years ahead.

Lung Association Needs to Take a Deep Breath of Reality

Summary: The American Lung Association has released its annual “State of the Air” report for 2018.  As expected, the organization criticizes our nation’s air quality in general and continues to smear Pittsburgh in particular.  It blames climate change as a reason for increased levels of air pollution nationwide and calls for a continued fight against climate change and greater enforcement of the Clean Air Act.  Against this backdrop, it ranks regions around the country in terms of particle pollution (soot) and rates the Pittsburgh region as eighth worst in the country.

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The U.S. Environmental Protection Agency (EPA) places air quality monitors in locations around the country and reports the monitor readings on its website.  Using the EPA data and the EPA’s “critical values” of air pollutants, the Lung Association produces and publishes its regional rankings and warnings.

The Pittsburgh region, as designated by the Lung Association, is comprised of 12 counties in three states:  Jefferson in Ohio; Brooke and Hancock in West Virginia and Allegheny, Armstrong, Beaver, Butler, Fayette, Indiana, Lawrence, Washington and Westmoreland in Southwest Pennsylvania.

Within these 12 counties there are a total of 19 monitors providing 29 readings for particle pollution (PM2.5).  This shorthand designation refers to particulate matter that is less than 2.5 micrometers in diameter and is typically the result of combustion of organic compounds. Some monitoring locations produce several readings including Steubenville, Jefferson County, and Greensburg, Westmoreland County, with three readings at each monitor. In Allegheny County the Lawrenceville and Liberty Borough monitors each provide two readings.  As do monitors in Beaver County (Beaver Falls), Washington County (Washington City and Hillman State Park) and Brooke County (Weirton). Some counties have multiple monitors reading for PM2.5 (Allegheny, Washington, Jefferson and Brooke) while some counties (Butler, Fayette, Indiana and Lawrence counties) have no monitors.

The EPA has set the critical level for PM2.5 at 12.0 micrograms per cubic meter of air (annual mean of a monitor’s readings averaged over three years) for primary standards.  This level is selected as necessary to protect the health of “sensitive” populations such as asthmatics, children and the elderly.  For secondary standards, which provides protection against decreased visibility and damage to animals, crops, vegetation and buildings, the critical level is set at 15.0 micrograms per cubic meter of air.

Keep in mind that critical levels have changed dramatically over the years since the Clean Air Act was implemented in 1971.  For PM2.5   the original level, set in 1971, was 75.0 micrograms per cubic meter of air calculated on an annual geometric mean as the primary standard—the secondary standard was set at 60.0.  The critical level was lowered to 15.0 in 1997 and calculated as an annual mean averaged over three years for both primary and secondary standards. In 2012, the primary level was set at 12.0 micrograms per cubic meter.

The point being that the standards have been tightened over the years to reflect the major improvement in air quality overall across the country and in the Pittsburgh region.  In fact, according to EPA data, the national trend in PM2.5 has decreased by 42 percent nationwide from 2000 to 2016, falling from an annual average of 13.4 to 7.8.  In the Northeast region of the country, which includes Pittsburgh, PM2.5 levels have dropped by 45 percent going from an average of 13.8 in 2000 to 7.6 in 2016.  These data belie the Lung Association’s claim of deteriorating air quality due to climate change. Just more hyperbolic fear mongering.

The latest Lung Association ranking places the Pittsburgh region as eighth worst of 187 regions for annual particle pollution.  It does, however, note that the region’s overall air quality has improved since 2000.  For example, readings from a line chart in the Association’s report puts the three-year average in 2000-02 at slightly above 21parts per cubic meter while for 2014-16 the average was under 13. Note however that the actual numerical values are not presented in the report.  The report does note that the annual particle pollution level has been reduced by 8.6 micrograms per cubic meter of air (a 40 percent decline)—a fact that somehow eluded local media coverage.

Furthermore, recent readings from the area’s monitors show an interesting result that points to deliberate misuse of the data by the Lung Association.  Of all 19 monitors and 29 three-year average readings there were only two monitors with particle counts above the critical limit of 12.0 per cubic meter of air—the Liberty Borough monitor (two readings of 12.9 and 13.1) and the Steubenville monitor (one of its three readings at 12.7).  The other 26 particle count readings in the 12-county region were below the critical level, including the other two from the Steubenville monitor (10.3 and 9.8).  In fact, the average of all 29 readings (the three-year annual average for each monitor) for the three-state, 12-county area is just 9.9, well below the critical level of 12.0 and contradicts the Lung Association’s chart showing an area-wide level of over 12.0.  This amounts to deliberately and falsely labeling the region as out of compliance. Indeed, how can Butler and Indiana be lumped in when no monitor readings are available in these counties?  There is no excuse for this level of statistical and reportorial malpractice.

Earlier Policy Briefs noted, and it is worth repeating, the Liberty monitor is in close proximity to U.S. Steel’s Clairton Coke Works.  Another point that is being overlooked is how much better the readings from this monitor are compared to 10 years ago.  Looking at the three-year annual average, the two readings from 2004-06 this monitor came in at 20.2 and 21.1.  Thus, in 10 years the readings show the levels of PM2.5 were reduced by 35 percent and 38 percent, respectively.

Amazingly, the Lung Association’s report assigns Allegheny County a failing grade on its particulate matter levels due to the readings at the Liberty monitor. The other seven monitors and their eight readings in the County were well in compliance, averaging 9.6 particles per cubic meter.  Allegheny County was the only one of the 12 to receive to receive a “fail” for its level of particle pollution.

Regarding the other monitor showing levels above the acceptable amount, the Steubenville monitor, located on the Ohio River and not too far from industrial sites, had a three-year average reading of 15.1 a decade ago (only one reading was taken at that time).  PM2.5 levels have been reduced by 16 percent at this monitor and it bears repeating that only one of three readings from this monitor were above the acceptable level of 12.0 (12.7).

The Lung Association’s latest report, and the headlines that immediately followed, give the impression that air quality in the Pittsburgh area has gotten worse over the last few years.  But, in fact, the opposite has been true.  Only one of the 12 counties in the region received a failing grade—Allegheny County.  And, as was noted above, that was based on the readings from just one of the eight monitors stationed around the county.  The other seven are consistently reporting air that is well below the critical level.  Even at the offending monitor the levels are just above the critical level—a critical level that has been lowered dramatically over the years including down from 15 parts per cubic meter five years ago.  The Lung Association’ smear campaign is unjustified and does not reflect the progress the area has made in improving its air quality.

How much money will the folks charged with trying to attract businesses have to spend to offset the annual barrage of misleading news about the area’s air quality?  What will Amazon think? Presumably they and other companies are smart enough to have studied the Lung Association’s air quality analysis and commentary and found them to be seriously flawed and misleading.

State University System Requires Major Legislative Remedial Actions

Summary: The 14 state-owned universities that make up the Pennsylvania State System of Higher Education (PASSHE) face enormous difficulties.  The problems have been well documented by two previous Allegheny Institute Policy Briefs from 2017 and two major studies, the first by National Center for Higher Education Management Systems (NCHEMS) and the second by the Rand Corporation.  This Brief goes into more depth regarding the financial situation, costs and performance than the Rand and NCHEMS studies and offers suggestions for addressing the problems. Legislative actions regarding faculty unions and degree offerings among the schools should be at the top of the list.

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At the top of the list of its woes, PASSHE schools have seen a near steady decline in total enrollment (undergraduate and graduate) since the 2010-11 academic year, with only Slippery Rock and West Chester seeing an enrollment increase. All data cited in this Brief are published by the Joint State Government Commission in its 2017 and 2018 reports on PASSHE schools and state-related universities. Enrollment figures show the system lost 14,814 (13.2 percent) fulltime equivalent students (FTE) from 2010-2011 to the 2016-17 academic year to stand at 97,512. The 12 schools with declining FTE since the 2010-11 academic year saw their count slide 17,033 or 18.9 percent. Cheyney’s 40 percent and Mansfield’s 34.6 percent plunge along with Clarion’s 29 percent dive led the percentage declines.  Declines in five of the other schools were in the 20 percent range.

Note that the western PA universities in California, Clarion, Edinboro and Indiana had a combined six-year  drop of 8,200 FTE students —almost half of the combined losses at the 12 schools with declining enrollment. These four western schools, along with Slippery Rock, have student drawing areas that overlap substantially.

The numbers for undergraduate students are even worse than the total enrollment figures. Only West Chester had a gain over the period while Bloomsburg and Slippery Rock had minimal declines. But FTE count at the other 11 schools fell a total of 21.8 percent led by Cheyney’s 40 percent drop, followed by Clarion, Edinboro, Lock Haven and Mansfield at 25 percent or more.

And for the future the situation gets worse because projections of high school graduates from most areas of the state—the overwhelming sources of enrollees at PASSHE schools—show a long term declining trend from current levels.  In short, the enrollment problem for the schools already suffering major declines is going to get worse. And the truly excruciating dilemma:  as enrollment falls, it gets ever harder to maintain degree programs and course offerings and the best faculty begin to seek alternative employment, making the schools increasingly less attractive to potential students. In sum, several PASSHE schools are facing a self-reinforcing downward spiral.

Note too that several schools are facing the additional problem of having major drops in the number of students from the lower division compared to the upper division.  Bloomsburg’s ratio of upper division count to lower division is lowest at 42 percent. Several others are well under 50 percent. By contrast, Slippery Rock and West Chester ratios are 64 and 65 percent, respectively.   The inability to retain students points to even greater problems in the future as potential freshman enrollees from Pennsylvania continue to decline.

And adding to the crisis—and embarrassment—for the PASSHE schools, enrollment at Penn State has continued to grow climbing by 11,160 or 14 percent over the last five years. Temple FTE is up 2,692 or 7.8 percent. Enrollments at Pittsburgh and Lincoln are essentially flat.  In sum, the state-related schools (Penn State, Pittsburgh, Temple and Lincoln) have added almost as many students as the combined 14 state-owned schools lost.

Faced with their severe enrollment problems, several PASSHE universities have adopted very lax entrance requirements, accepting virtually everyone who applies.  This clearly aggravates the dropout problem as well as imposing needless costs on students and taxpayers.

Meanwhile, during the same period in which the FTE student count fell 18.9 percent at the 12 universities that lost students, total instructional staff, including full time faculty, adjuncts and graduate assistants at these schools, fell just 6.3 percent from 4,429 to 4,152. This does not bode well for cost per student.

Compounding the unfavorable comparisons with state-related schools, class sizes are smaller and faculty cost per student higher at the state-owned universities than at the state-related schools (Penn State, Pittsburgh, Temple and Lincoln). For purposes of the class size and faculty cost comparisons, Lincoln and Cheyney are excluded because of their very small size relative to the other schools in their group and their being far outside the norm for their groups’ class size and cost statistics.

For lower division students, as classified by the Joint State Government Commission report (presumably mostly freshman and sophomore), average class size at state-owned schools was 29 students. At the state-related schools the average was 31. For upper division students the PASSHE schools’ classes averaged 19 students per while state-related universities averaged 25.

At the same time, faculty costs per student at the PASSHE schools are on average slightly higher for lower division students compared to state-related schools ($3,076 to $2,850). There is a wide variation in costs in the state-owned schools, ranging from $2,500 to $4,000. Most of the schools (excluding Cheyney) are close to $3,000 or a little higher. For upper division students the average faculty costs per student were much higher at the PASSHE schools than at the state-related schools, $5,409 compared to $3,932.

Employee costs other than wages and salaries are also quite high for the combined State System schools.  In the year ended June 30, 2016, non-salary costs were $523 million, equal to 59 percent of the $880 million paid in salaries and wages. For 2014, the percentage was 52 percent. The two year increase was due to a $72.6 million or 80 percent jump in pension payments by the universities. This was necessary to cover the leap in the employer match requirement for SERS and PSERS. Then too, combined employee and retiree health expenditures were $253 million, equal to 29 percent of salary cost in the year ended June 2016.

Plainly stated, faculty cost efficiency in terms of class size and cost per student in the PASSHE schools are on average no bargain compared to the state-related schools with their many satellite campuses.  This is opposite of the situation one would have expected.

And as far as the funding argument is concerned, bear in mind that state instructional appropriations per student in the 2016-17 academic year were much higher for PASSHE schools than for the state-related schools ($4,504 compared to $3,292). Per student state appropriations ranged from a high of $16,839 at Cheyney to a low of $3,400 at West Chester.  Meanwhile for the state-related schools, Lincoln got the largest per-FTE appropriation with $7,581 and Penn State the lowest at $2,540.

Clearly, in light of these data most PASSHE schools face severe financial and enrollment problems. Two recent studies looked at the schools to determine the problems and how to fix them. The NCHEMS report from July 2017 presented a description of the problems at the schools but failed to offer any real solutions.  Indeed, the report amazingly identified the root cause as “inadequacies of the governance structure for coping with converging pressures.”

Moreover, NCHEMS made two astoundingly counterproductive recommendations.  One; “No institution should be closed and there should be no mergers of any institutions. Second; (make) “no attempt to undermine collective bargaining agreements or processes.” This after noting that the just-signed faculty union contract calls for $52 million more compensation than the old contract for the already cash strapped university system. In short, the NCHEMS report was essentially useless from a solutions standpoint.

Recently, a Rand Corporation report commissioned by the Legislative Budget and Finance Committee was released.  The report reviewed the enrollment decline as well as the governance issues explored by NCHEMS. However, Rand offers some pointed criticism of the recently approved faculty union contract and provides five options for reorganizing the PASSHE schools.

According to Rand, “Interviewees noted that factors contributing to this strained (union –management) relationship include the contract provisions and their enactment, as well as the collective bargaining agreement negotiation process.”

Faculty salary scale and assignment restraints were of particular concern, first, “The current scale is uniform, does not take disciplines into account, and does not allow for market-based adjustment” and second, “faculty cannot be required to teach online classes unless it is in their letter of appointment.”

And there are more provisions that are beyond understanding; two stand out. “Institutions cannot hire new faculty without the approval of all faculty in the department. And “Institutions cannot retain highly rated faculty over more-senior faculty.” Little wonder university officials view these restrictions as both costly and an obstacle to efforts to do needed restructuring of academic programs.

In general, the contract’s provisions make it hard or impossible to use managerial discretion to undertake cost savings, to hire the best people in some fields, change course delivery methodologies and to move personnel to the institution’s greatest advantage.

Rand proposed five options for dealing with the management structure issues as well as the underlying enrollment issues.  These include the following from the report:

  • Option 1: Keep Broad State System Structure, Including Current Individual Universities, but with Improvements
  • Option 2: Keep Broad State System Structure with Improvements Accompanied by Regional Mergers of Universities
  • Option 3: Merge State System Universities and Convert to State-Related Status
  • Option 4: Place the State System Under the Management of a State-Related University
  • Option 5: Merge State System Universities into State-Related Universities.

Obviously, each of these options would require a lot of legislative changes in terms of the governance structure. Those involving mergers of schools would also require legislation to specify which schools would be merged, what the new names would be and the process for handling personnel and programs changes necessary to accomplish the mergers.

There is little chance of folding PASSHE schools into the state-related schools.  That would almost certainly require closures of several schools in order to reduce overlapping student feeder regions. Then, too, the absence of labor bargaining agreements at Penn State and the University of Pittsburgh—despite ongoing union organizing efforts—would make integration extraordinarily difficult.  Pay scale differences and faculty limitations on management would create insurmountable obstacles.

Notwithstanding the difficulties of closing or merging one or more of the PASSHE schools, it is clear that major actions need to be taken.

Even though it will be politically difficult, the Legislature must do what is best for the state’s taxpayers and the education of its students.

First, it should take away the right to strike of employees at state-funded institutions and outlaw provisions in contracts that require using seniority over excellence in layoff decisions. Second, recognize that Cheney and perhaps Mansfield with their enormous declines in enrollment are far too small to offer adequate programs to be assigned university status.  Close them or merge them with other schools.

A more promising approach to addressing the problems of most PASSHE schools would involve arranging program degree offerings among the universities in a way that would have each school achieve a level of faculty excellence and reputation in a few specific fields that would generate student interest. This would eliminate having cookie cutter duplication of degree offerings across the system. It would also limit the need for closings or mergers and would allow each school to reach an optimal size. This will present difficulties because the number of instructional staff will continue to decline with falling enrollment and some faculty might have to be reassigned to other schools.

One thing is certain; letting the system continue on its current path will waste huge amounts of money, lead to sub-optimal educational opportunities and outcomes and be a source of terrible anxiety for everyone involved.  Corrective actions by the Legislature and governor are extremely overdue.

2017 Appeals: Another Round Goes to Taxing Bodies

Summary: Last year, 7,015 appeals of property values were heard in Allegheny County resulting in a net increase of $85 million in assessed value as successful taxing body appeals to raise appraisals exceeded owner appeals to lower them. Furthermore, in a very important recent decision, a Court of Common Pleas judge affirmed the right of taxing bodies to appeal values based on sales price.

 

In 2017 Allegheny County property owners filed 2,927 property value appeals with the county’s Board of Property Assessments Appeals and Review (BPAAR). Upon entering the appeals process, the aggregate value of these properties was $1.8 billion. After going through the process, the aggregate value was lowered to $1.609 billion, a decrease of $191 million (10.6 percent). The majority of the owner appeals were on residential property (80 percent of the 2,927 appeals).

Meanwhile, taxing bodies filed 4,058 appeals—1,100 more than owners. The properties started out with an aggregate assessed value of $985 million. When the appeals were completed, the post-appeal value was $1.260 billion, a $275 million increase. About 8 percent of the BPAAR decisions proceeded on to the Court of Common Pleas’ Board of Viewers.

Which taxing bodies brought appeals? Municipalities accounted for 19, with Mt. Lebanon accounting for 15 of the appeals. Munhall appealed one property’s value and Turtle Creek appealed three. The City of Pittsburgh filed no appeals in 2017 and it appears that the April 2016 directive of the mayor to end city-initiated appeals has stayed in place. Since Allegheny County does not appeal assessments, this means school districts filed over 4,000 appeals. All but seven of the county’s 43 districts were active in the process. The Pittsburgh Public Schools (PPS) appealed assessments on 579 properties, both residential and commercial, so it is possible the district appealed properties that the City of Pittsburgh might have if it were still seeking to get a correction of the appraisals of substantially under assessed properties.

Results of 2017 Appeals (Change in Value from Pre-Hearing to Post-Hearing, $000s)

The overall net effect of owner, taxing body and combination (in this case both the owner of the property and the school district appealed the property value) appeals in 2017 was an $85.9 million increase from pre-appeal value to post-appeal value. As a percentage of the subtotals, non-residential owner appeals accounted for 70 percent of the overall drop in assessed values for properties appealed by owners. For the taxing body appeals the increase in residential value accounted for close to 80 percent of the rise in assessed value resulting from appeals.

Notwithstanding the wishes of many people, there is little reason to expect a state law prohibiting taxing bodies examining sales and appealing the assessments of properties where they are far lower than the recent sales prices. Ten years ago the General Assembly passed legislation to prevent appeals by taxing bodies based on the sale price. The then-governor vetoed that legislation and said appeals by taxing bodies were the way to ensure assessment fairness and that the long-term solution was to mandate a frequent reassessment cycle for counties. A decade later, there is still no movement toward a mandated regular reassessment cycle. It appears the long term mentioned by the governor should have been referring to the time it would take to get real reform. On the other hand, a decade later a bill to prohibit the practice of sales-based appeals has been pending in the House of Representatives for over a year, which suggests the Legislature has no intention of listening to the former governor or looking around and seeing what all but one other state does regarding regular assessment updates.

But for now the courts are following the state law with regard to taxing body appeals. Recently a lawsuit was filed in Allegheny County Common Pleas Court by property owners (plaintiffs) who purchased a home in the City of Pittsburgh for $750,000, well above the assessed value of $464,700, only to have the assessment raised on PPS appeal to $690,000. The owners sued Allegheny County, the City of Pittsburgh, the PPS, and the BPAAR as a class action on behalf of all property owners who had their assessment raised by a taxing body appeal in the years 2014 to 2016 as a result of a sale and not a change in the characteristics of the property.

The plaintiffs cited language in the county’s Administrative Code and the BPAAR rules of procedure that “prohibit taxing bodies from offering evidence of recent sales, including sales of the subject property itself, to challenge the base year assessment.” Taxpayers are allowed to do so under the local rules language. The taxing bodies claimed that the code language and the rule are ignored in practice and that they simply “proffer evidence derived from a recent sale of a property in appeals subsequent to the base year to determine current market value and then the BPAAR utilizes this current market value to ‘reverse engineer’ an adjusted base year assessed value.”

The Common Pleas Court’s decision that denied the plaintiffs relief—which has been appealed to Commonwealth Court—is squarely based on the section of state law delineating the rights of taxing bodies to file appeals. The judge’s ruling cited language in the Second Class County Charter Law that prohibits the charter from enlarging the county’s powers on assessments of real property (raising a problem for the Administrative Code language and the BPAAR rule). The ruling also cited the Second Class County Assessment Law, which does not deny taxing bodies the right to appeal on the basis of current market value, and the state’s General Assessment Law that permits taxing bodies to appeal “in the same manner, subject to the same procedure, and with like effect, as if such appeal were taken by a [taxpayer] with respect to his property.”

So what about mandating more frequent reassessments to reduce appeals (by both taxpayers and taxing bodies) and to eliminate the sticker shock of new updated values come about when there is a long period between reassessments? The opinion noted,

“Counsel for Plaintiffs repeatedly expressed frustration that the County fails to conduct regular, county-wide reassessments. This frustration is understood. Certainly, the risk of non-uniformity increases when county-wide reassessments do not occur on a regular basis. However, no party is requesting that a county-wide reassessment be ordered, and the Court is not inviting such a request, as the Court sees no evidence of its necessity established by the pleadings filed to date.”

Too bad about the last sentence quoted from the ruling. The judge could prevent a lot of angst and costs brought about the thousands of appeals that are still occurring six years after the last reassessment by ordering the county to do the right thing and do a reassessment.

But the county’s leadership refuses to reassess, the state doesn’t want to force counties into a reassessment cycle and appeals keep happening. As we have pointed out before, “there is massive resistance among politicians to doing the right thing in terms of their unwillingness to reassess on a regular and frequent basis to keep assessments as close to market value and accurate as possible. As a result, taxing bodies, in an effort to create more equitable taxation, have adopted the strategy of appealing the assessments of recently sold properties.”

This practice unfortunately singles out recent buyers since their neighbors’ homes might have risen in value as much as the one they just bought but the neighbors are not subjected to a taxing body appeal. Clearly, there is an element of improving tax fairness in the appeals. But it is also clearly a sub-optimal and hardly an equitable way to create equity.

Details on the Port Authority’s Extremely Costly Bus Service

Summary: A recent Policy Brief (Vol. 18, No. 13) demonstrated the Port Authority of Allegheny County’s (PAAC) very high bus operating expense compared to five comparably sized transit agencies. This Brief expands the number of agencies compared and looks at additional measures of efficiency and pay levels to develop a thorough understanding of the key differences that lead to PAAC’s extremely expensive bus operations. The news is not good. PAAC’s bus service is inexcusably costly and imposes far too heavily on taxpayers and Turnpike users.

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As noted in the March Policy Brief, the most comprehensive measure of operating cost effectiveness for comparison purposes is operating expense per revenue hour. That is, the non-capital outlays required to deliver services divided by the hours buses are actually on routes picking up and discharging paying passengers.

Total operating expenses per revenue hour data for 2016 were gathered from the National Transit Database for 28 transit agencies across the country. Of the 28 only one, New York City at $226, had higher operating cost per revenue hour than PAAC’s $189.69.  Boston ($185.14) and San Francisco ($186.54) were close to PAAC. The next most expensive were Newark, N.J. at $167.47, Seattle at $159.41 and Southeastern Pennsylvania Transportation Authority (SEPTA) in Philadelphia at $158.40. D.C. Metro was $152.30 and Los Angeles was $153.73.

No other agency in the group of 28 had total cost per revenue hour over $150. Several were in the $140s including Cleveland, Minneapolis, Miami, Syracuse and New Orleans. Chicago was $139.14. The remaining 14 bus systems had costs per revenue hour ranging from $101 to $130, including Phoenix; Buffalo; Jacksonville; Dallas; Charlotte; Milwaukee; Columbus; Salt Lake; Denver; Indianapolis; Cincinnati; St. Louis; San Antonio and Atlanta.

For detailed comparison with PAAC, a group of 10 systems were selected:  Charlotte; Cincinnati; Columbus; Cleveland; Milwaukee; Minneapolis; St. Louis; Atlanta; San Antonio and Salt Lake.

Operating expense per revenue hour is made up of several expenditures and factors, including operator wage expenses; wages of other employees necessary to produce bus services; fringe benefits of all employees involved in bus service delivery and nonemployee expenses (fuel, etc.), the percentage of vehicle hours that are actually on revenue-producing routes and any time for which drivers are paid while not actually operating a vehicle.

For purposes of this analysis the ratio of operator wages paid, other employee wages and fringe benefits for all bus-related employees to revenue hours and to vehicle hours were calculated for each of the comparison agencies. Recent estimates of average hourly wages for drivers for each agency were collected.

PAAC had a total operating expense per revenue hour of $189.69 while the 10 agency comparison group averaged $117.42, making PAAC 62 percent more expensive than the 10 system average.  Of the 10 agencies, Cleveland had the highest cost per revenue hour at $148.86 followed by Minneapolis at $145.57. The lowest operating cost agencies were Charlotte ($101.31), Milwaukee ($101.28) and San Antonio ($103.28).

Calculated on the basis of cost per vehicle hour, PAAC stood at $161.58 and the average for the 10 was $107.44 making PAAC 50 percent more expensive than the group average. Note that PAAC’s 62 percent greater operating expense per revenue hour compared to the 10 systems is significantly higher than the 50 percent difference in the cost per vehicle hour. This results in part because only 85 percent of PAAC’s vehicle hours are actually revenue hours while the average of the 10 comparison agencies was 91.5 percent.

A look at the components of operating expenses reveals the underlying problem with PAAC’s extremely high relative operating expense per revenue hour.

The most obvious comparative cost measure is driver wage rate.  PAAC’s average of over $25 per hour is 32 percent above the 10 system average of $18.98. The highest wage rate agencies are in Milwaukee, Minneapolis and Cleveland with average hourly wages of between $24 and $25.  The lowest hourly wage agencies were in Atlanta, San Antonio, St. Louis, Cincinnati and Salt Lake with wages between $15 and $17 per hour.  Among the very large transit systems reviewed, Chicago’s driver wage was just under PAAC’s while Boston’s was slightly higher. New York and San Francisco at $31 plus per hour were much higher.

Total operator wages expended per revenue hour to deliver bus service were $37.48 at PAAC and averaged $28.77 for the 10 agencies, a difference of 30 percent. The highest wages per revenue hour for the 10 systems were in Minneapolis at $36.19, followed by Cleveland $32.12 and Cincinnati at $32. The lowest operator wage expense per revenue hour was in Columbus ($23), followed by Atlanta ($25.45); San Antonio ($25.88) and Salt Lake ($25). The remaining three systems had expenses ranging from $28 to $30 per revenue hour.

Note that PAAC’s total operator wage payments per vehicle hour were $31.92, reflecting the fact that only 85 percent of vehicle hours are actually revenue producing hours. Still, the operator cost per vehicle hour is about $6 higher than average driver wages per hour.  This occurs because of overtime pay and pay for time the operators are not driving but are still on the clock.

For the remaining analysis only per revenue hour figures will be discussed since the relation of those costs to cost per vehicle hour has been established.

The second cost component examined is wage expense for bus service employees other than operators. For PAAC the wage expense per revenue for non-operator employees is $39.85 while the average for the 10 comparison agencies is $24.73 making PAAC 61 percent more costly than the group for this cost component. The highest expense among the 10 agencies was in Cleveland at $36.80. The lowest non-driver wage expense agencies were Charlotte ($17.20); Columbus ($22.88); St. Louis ($19.99); San Antonio ($20.54) and Milwaukee ($12.31).

The final component of employee cost is the fringe benefits for all bus service employees. At PAAC fringe expense per revenue hour in 2016 was $72.76 and the average for the 10 systems was $36.27 making PAAC’s costs per hour 100 percent greater than the group. Cleveland had the highest fringe expense per hour at $47.57, followed by Minneapolis at $46.58. Charlotte was lowest at $22.47. The rest ranged between $31.50 and $39.

Total employee cost per revenue hour at PAAC was $150.08 compared to an average of $89.77 for the 10 systems making PAAC employee costs per hour 67 percent higher than the group average.  The highest employee cost system in the group was Cleveland at $116.50 and Minneapolis at $116.07. Lowest employee cost was posted by Charlotte at $68.59. The other systems’ employee costs ranged from $78 to $91 with most in the $80s. In short, PAAC’s employment expenses are enormous compared to these similar sized agencies.

Finally, the cost comparison analysis looks at non-employee costs. PAAC’s non-employee expenses per revenue hour were $39.61. The 10 system average was $27.65, making PAAC’s non-employee costs per hour 43 percent more expensive than the average.

All told, the operating expense per revenue hour was $189.69 at PAAC.  None of the 10 similar size systems came anywhere near that close to that figure with Cleveland the closest at $148.90.

PAAC’s costs are not just a problem for Allegheny County for matching funds and fares, the agency also receives substantial state funding.  For many years, the management and boards at the authority succumbed to union pressures in order to avoid strikes.

Consider that if PAAC had the same cost per revenue hour as the 10 similar size agencies, it would have cost $114.8 million less than the $301 million PAAC actually spent for the 2016 level of service. Just lowering PAAC to SEPTA bus costs per revenue hour would save $48 million per year at current operation levels. Then, too, finding ways to raise the ratio of revenue hours to vehicle hours to the level in the 10 system average would save a lot of money.

Public transit system funds have to come from the fare box or taxpayers, and in PAAC’s case, from tolls paid by Pennsylvania Turnpike users, thanks to Act 89 of 2013. The decision made by the Legislature to allow unionized transit workers to strike and the unwillingness of management to face down unions threatening to strike has resulted in a cost structure that is far outside the norm. Then too, PAAC’s non- employee costs are much higher than those expenses at comparison transit systems.

The PAAC situation demands action to correct the egregious costs PAAC is incurring. Why does the Legislature countenance this glaringly overly expensive transit system and make no effort to rein in the spending and at the very least remove the right of transit workers to strike?

A Comparative Analysis of Pittsburgh International Airport Passenger Data

Summary: From 2015 to 2017 flights and passenger counts rose at Pittsburgh International Airport. While the numbers are certainly much improved, are they better than the performance at similarly sized airports? This Brief finds the Pittsburgh gains to be about average relative to the study group and well short of the best performers.

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A Policy Brief from earlier this year looked at the passenger data from the U.S. Department of Transportation and compared the performance of Pittsburgh International Airport (PIT) to that of similarly sized airports around the country.

But when that Brief was published data for domestic passengers in 2017 covered only through October.  The data for domestic passengers have been finalized for 2017 which enables a full-year comparison.  Domestic travelers account for the vast majority (98 percent in 2016) of airline passengers at PIT and will be the focus of this Brief.

The data cover origination passengers—the starting point of a trip—and destination passengers—the farthest point of travel from the origin of a trip of 75 miles or more (as per U.S. Department of Transportation criteria).

Based on information as of October, it was noted that passenger count at PIT had moved higher. The full year of data did not change that finding.  Predictably, local officials are touting the recent gain. However, as shall be shown in this Brief, some perspective on the latest uptick in passengers is called for.

In 2015 the number of domestic origination and destination passengers (O&D) using PIT was just above 7.61 million.  The count for 2017 was 8.34 million, an increase over the two years of 9.7 percent.  Bear in mind that PIT’s 8.34 million O&D passengers represent a mere 0.56 percent of the national figure of 1.483 billion.  PIT’s percentage growth over the two year period is better than the total for all airports (6.55 percent).

Interestingly, the two year gain at the major airports (the busiest 30) was only 5.5 percent with the remaining airports posting a nearly 9 percent higher count. The extent of concentration of airline flight O&D is demonstrated by the fact that the 30 highest passenger count airports account for 69 percent of all domestic O&D passengers. Nonetheless, faster growth appears to be happening at the smaller airports, perhaps because there is more capacity for additional flights. Note that PIT ranked as the 48th busiest airport in terms of enplanements (2016).

Of the 15 similarly sized airports—those ranking 38th through 52nd in the Federal Aviation Administration’s ranking by 2016 enplaned passengers—Cincinnati experienced the biggest jump in O&D at 25 percent, and ranked 52nd,  followed by San Jose (up 23.4 percent, ranked 40th) and Raleigh (up 14 percent, ranked 39th).  PIT’s 2015 to 2017 increase ranks ninth best in this group of 15 comparable airports.  San Juan, Puerto Rico (down 3.4 percent, 43rd) Santa Ana, California (up 3.8 percent, 41st) and Fort Meyers, Florida (up 4.9 percent, 45th) recorded the weakest two-year performances. Of course San Juan was beset by problems with the 2017 hurricane season that undoubtedly reduced air travel sharply. The average growth rate for the 15-airport sample is 10.5 percent.

Another metric of airport performance is the number of O&D flights at each airport.  PIT’s supporters point to a rise in number of flights being offered, but again how does that stand up to the activity at similarly sized airports?

From 2015 through 2017 the number of O&D flights at PIT rose by 2.8 percent.  For the 15-airport sample the average growth rate to O&D flights is four percent.  For all airports around the country that growth was more subdued at just 1.4 percent.  At the major airports the gain was a bit better at 1.5 percent while the remaining airports had O&D flight growth of just 1.3 percent.  In the group of 15 comparison airports, PIT’s growth in flights ranks ninth.  At the top is San Jose (25.4 percent) and Sacramento (12 percent, 42nd) while San Juan (-13 percent) and Milwaukee (-3 percent, 51st) sit at the bottom with drops in traffic. In fact five airports from this group had either no gains or declines.

An important measure of airline productivity is the “load factor.”  Load factor is defined by the airline industry as the ratio of passenger miles flown to the number of seat miles available.  For originating flights across all airports the load factor for 2017 was 84.57—down slightly from the 2015 level of 84.98.  For airports ranked in the top 30, the origination load factor in 2017 was 85.43, down from 85.79 in 2015 while for the remainder the factor was 81.99 down from 82.46.

In 2015 PIT had the lowest origination load factor of the 15 airports in the comparison group at 79.07. In 2017 the load factor at PIT edged up to 81.2, placing its ranking at third worst just ahead of Cincinnati (81.07) and Columbus (80.37).  San Juan had the highest load factor in both 2015 (89.19) and 2017 (90.97), while the average for the comparison group stood at 82.51 in 2015 and 83.14 in 2017.

Destination load factors are about the same as origination load factors, as one would expect.  The load factor for PIT’s destination flights stands at 81.24 up 2.4 percent from 79.31 in 2015.    While this percentage rise is respectable, the load factor remains low compared to the all airport total of 84.57 and the ratio of 85.55 posted at major airports.  PIT’s 2017 load factor was better than Columbus (81.07) but trailed the rest of the airports in the sample. The sample average in 2017 was 82.78 for destination flights.

The relatively low load factor at PIT for both O&D flights points to substantially more unfilled seats than the national average as well as 2.4 percent more unfilled seats than the comparison group average. This relatively low load factor is almost certainly a consideration in decisions about adding flights. If underserved markets for Pittsburgh area travelers can be ferreted out, there might be further expansion.  Otherwise gains in passenger counts will depend heavily on growth in the population age groups that have high propensities to travel by air and on the growth of employment and incomes in the airport’s service area.

However, as has been documented, officials in charge of PIT don’t necessarily rely on market forces alone to help airlines make decisions.  For example, a late January news article noted that in 2017 PIT paid out $3.4 million in incentives to offer passenger service to five destinations and cargo service by a Middle Eastern carrier.  OneJet also received a million dollars to begin service over the next two years and Allegiant Air has begun service to Charleston, S.C. with a “small marketing” incentive.  Unfortunately, six months into the cargo flights things are not going well and the airport may be on the hook for $1.5 million in wasted subsidies—a glaring example of how ignoring market forces and looking for headline grabbing announcements can be misguided and very costly.

More unfortunately, there seems to be no sign of ending carrier subsidies.  Subsidy-happy airport officials must have warmly welcomed the Legislature’s indefinite extension of the $12 million per year in gaming money that was about to come to an end.

The bottom line:  PIT’s flights and passenger counts have risen in recent years.  But other airports of similar size have seen more improvement than PIT in key gauges of activity. Plus there has been a significant rise of air travel nationally that has benefitted most commercial airports.  In short, the airport needs to be a little less self-congratulatory about its better numbers.

Gaming Dollars Get Shuffled

Summary: A look at how Act 42 of 2017 changed the amounts and purposes of the money coming from a fund established to support economic development and tourism projects.

 

When the General Assembly legalized slot machines in 2004 it required part of the tax levied on slots play to provide revenue to create a Gaming Economic Development and Tourism Fund (GEDTF). Projects funded by the 5 percent tax used to fund the GEDTF included the expansion of the Pennsylvania Convention Center in Philadelphia ($880 million), the hockey arena in Pittsburgh ($225 million) and seven other projects in Allegheny County ($404 million).

The seven projects were slated to get money over a decade and payments began to materialize in the 2007-08 fiscal year. As time went on and we monitored the projects, we raised the question as to what would happen when the payments ceased.

In answer to our query, Act 42 of 2017 made plenty of changes to gaming in the state and among those were guidelines for the seven Allegheny County projects.

Money to fund debt service and airline fee reductions at Pittsburgh International Airport and money for two economic development/infrastructure funds that distribute dollars in Allegheny County will continue in perpetuity. By the end of the 2016-17 fiscal year these three designated recipients had received a total of $237 million and had $37 million remaining under the original 10 year arrangement. The amended language in the act states “the projects shall be authorized beyond the expiration date of each of the projects set forth [in the law that itemized the projects, Act 53 of 2007]” which means the $22.7 million distributed annually for these three projects will continue unless there is a change to the act.

However, the gaming money for the retirement of two other economic development funds, both of which were created in the 1990s when the City of Pittsburgh and Allegheny County issued bonds, and a bank loan for the David L. Lawrence Convention Center, will cease when the debts are paid in full. The total amount allocated from the GEDTF for these three recipients was $110 million. By the end of the 2016-17 fiscal year $93 million had been received. Based on information from the local government entities that received or audited receipt of the money (the Urban Redevelopment Authority, Allegheny County Controller’s Office and the Sports and Exhibition Authority) the debts that were being paid down, have been retired or will soon be retired.

The GEDTF’s separate allocation used to subsidize the operating deficit of the convention center will continue on but will be repurposed. The Sports and Exhibition Authority received $17 million of a $20 million total allocation to offset operating deficits at the Convention Center. This money will now be used to establish a Regional Sports Commission, which was mentioned when there was an effort underway to increase the county’s hotel tax. Moving the money from the operating deficit to the creation of the commission might possibly render the proposed hotel tax increase moot unless the other projects and recipients that would have been funded through a boost in the tax clamor for the levy.

It is not clear if the $1.7 million annual amount will be the limit on what the commission will spend for the expenses that are sure to come with creating yet another entity aimed at boosting tourism and events or if it will be seeking other sources of state and local dollars when it attempts to attract sporting events to Pittsburgh and its environs.

Going forward, Act 42 authorized $20 million ($2 million per year for a decade) from the GEDTF to a regional economic development corporation for debt service on a science center in the Lehigh Valley. There is a possibility that other parts of the state with projects on the drawing board will explore the possibility of tapping into the GEDTF, but no others were specifically authorized in the act.

Is this money well spent? What would taxpayers have preferred if given a choice of using the GEDTF money toward economic development projects or putting it toward school property tax relief via homestead exemptions? Right now, the total amount available for relief is around $619 million dollars and results in an average school tax reduction of $200 per homestead. As the allocations for GEDTF projects expire, the funding could be moved to raise the amount of money to be used for property tax reductions. Instead it will almost certainly go back to feed the insatiable appetite that is publically subsidized economic development in Pennsylvania.

To wit, one also has to wonder how long the convention center and tourism will require ever more subsidy. Regional Asset District (RAD) tax revenue, an extra hotel tax along with a large state allocation have gone into the center that ended up costing over a hundred million more than originally announced. Then too, the RAD tax funds many of the major amenities and attractions in the city as well as new stadiums.

An Update on Washington County’s Property Values

Summary: A look at the 2018 certified taxable values and millage rates for Washington County in the second year following a countywide reassessment.

 

Washington County’s taxable property values for buildings and land totaled $16.9 billion for 2018. That is a decrease from $17.2 billion in 2017 ($224 million or 1.3 percent), which was the first year new values from a reassessment went into effect. Data from the county show that slightly over 1,100 appeals have been heard since the last certified values were released. Many of the appeals have been settled and contributed to the decline in the county’s certified property value. The county moved from a 1981 base year in which property was assessed at 25 percent of that year’s market value to a 2015 base year with assessed value at 100 percent of market value.

There are 66 municipalities in the county. From 2017 to 2018 taxable value increased in 21 municipalities, was unchanged in one and decreased in 44. Close to half of the total taxable value in the county is situated in four municipalities near the southern border of Allegheny County: Peters ($3.1 billion), Cecil ($1.9 billion), North Strabane ($1.9 billion) and South Strabane ($1.2 billion). Cecil had the largest rise in value among Washington County municipalities, climbing $154 million over the last year. Taxable value also rose in Peters ($27.8 million) but fell in North and South Strabane ($35 million and $57 million, respectively).

Once value is established, taxing bodies can then determine tax rates. As we have noted on many occasions, there are legal requirements that apply to the setting of millage rates in the year the new values go into effect. Since 2018 is not a reassessment year, the county and municipalities are not constrained by those state law limits. Last year, for example, it would have taken a separate vote to increase the millage rate above the revenue-neutral rate that must be determined first. This year, and in future years when there is no reassessment, this procedure will not be required. School districts won’t set millage rates until closer to the start of the fiscal year in July. Those rates are subject to the Act 1 requirements on annual property tax increases.

The county will still levy a 2.43 millage rate in 2018 to fund its budget, meaning no tax increase from last year. With the unchanged tax rate, the slight decrease in value affects the county’s tax collections for 2018 negatively by about $600,000. Last year the tax levy was $41.8 million and this year it is $41.2 million, before any discounts, delinquent taxes or uncollectible taxes are considered.

Property tax rates were raised by 22 municipalities—including the City of Washington, which levies separate rates on land and buildings and boosted both rates. Nine of those increases came in municipalities that had taxable value increases from 2017 to 2018. Millage rates did not change in 39 municipalities and were lowered in two (three municipalities have not yet reported to the county). Only one municipality with an increase in value dropped its tax rate. As an example, the higher 2018 value in California Borough would have netted an additional $4,500 without changing the tax rate. But the boost in millage from 3.33 mills to 4.33 mills translates into a much larger $209,000 increase in current levy.

In the coming years there is a very strong likelihood that school districts in particular will be active in the appeals process. If a sale meets the criteria for an appeal (based typically on the percentage difference between the sales price and the taxable assessment) a district will appeal to have the appraised (and taxable value) moved closer to that of the sales price.

And why are appeals expected to continue for years? Because many counties go a very long time before reassessments and updating estimated market values, which they are allowed to do by state law. Currently 15 Pennsylvania counties have a base year that predates 1978. Decisions by county elected officials or court rulings on lawsuits brought by property owners determine when reassessments occur. Last year an observer of an eastern Pennsylvania reassessment noted there is “no county jumping up and down with excitement” to carry out an update to values. If the state were to pass legislation requiring counties to update on a regular cycle, opposition to reassessments would gradually decline as taxable value changes over two- to three-year periods are more predictable, smaller and less shocking than they are when decades have gone by since a reassessment.

Having just gone through the difficulties and angst of updating assessments, could it be that Washington County or a county that completed a reassessment within last five or 10 years is contemplating avoiding that ordeal by doing the next reassessment in a much more timely manner to avoid the problems for officials and property owners that long-delayed updates create? If they do, it would provide strong encouragement for the Legislature to get over its reluctance to bring Pennsylvania into at least the 20th century with regard to fairness in property taxation and enact legislation mandating that reassessments be done on a regularly scheduled basis.